Do I Need an Accountant for My Small Business?

You may consider getting an accountant for your small business to help file your tax returns, manage your payroll or for more general business advice.

Kristina Fox Published on 11 November 2022.
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Do I Need an Accountant for My Small Business?

When running a small business, you should keep a close eye on the money coming in and going out, as well as on your tax obligations. This can be intimidating if you don’t have much experience – not to mention time-consuming, even if you’ve been at it for years.

An accountant can help you manage your business finances, allowing you to spend more time on the day-to-day running of your business.

What can an accountant do for my small business?

An accountant can offer a range of services to small businesses, including help with:

  • business planning
  • setting up a business
  • taxes
  • cash flow management
  • growing your business
  • buying or selling a business

Business planning

Before you start a business, you should consider writing a business plan. This can help you get a sense of where to start and where to go next, both conceptually and financially. An accountant may be able to help you with this.

Even if your business is already set up, it is worth planning ahead either for future growth or as a contingency if something unexpected happens.

Setting up a business

Setting up a business involves a great deal of planning. From deciding whether you want to set up as a sole trader or a limited company to creating a business budget – an accountant can advise you in these areas.

For example, if you are employing staff for the first time, you will need to establish a way to pay them. An accountant can help you set up your payroll and manage it so that your staff get paid on time.This can be particularly useful if you haven’t ever had to complete this process before, or if you’re not completely sure about how to proceed.

» MORE: How much does it cost to hire someone in the UK?

Taxes

An accountant can help you prepare your tax return. They may be able to help you with tax efficiency, as well as your obligations to report your accounts to HM Revenue & Customs (HMRC) and comply with financial regulations.

If you’re a sole trader, you will need to file a self-assessment tax return each year and pay any tax you may owe. If you run a limited company, you have to submit your company’s accounts to HMRC and file a Company Tax Return. You may also have to pay Corporation Tax.

These processes can be jargon-heavy and intimidating – an accountant will often be able to help you cut through the noise and explain the more complex elements of paying tax and filing your accounts.

» MORE: Using a tax adviser or accountant for your tax returns

Cash flow management

An accountant can help you plan for peaks and troughs in your cash flow so that your business can continue to function even if costs rise or income falls.

For example, if you run a business with high seasonal turnover (at Christmas, for instance), you may need to plan ahead for the summer months when you’ll have lower income so that your business can continue to pay its staff and suppliers.

An accountant could help you make a cash flow forecast, a savings plan, or find a way to minimise unnecessary costs in months where income falls.

» MORE: Your small business budget in 5 steps

Growing your business

If you want to grow your business, it can be worth talking through your ideas with an expert. An accountant can often support you with planning for the future so that you can develop your business ideas.

What’s more, you may need to access a source of business finance such as a business loan. An accountant can help prepare your loan application and provide key financial statistics about your business to help show lenders that you are suitable.

» MORE: Types of business finance

Buying or selling a business

Whether you are looking to buy a business or sell your own business, there can be a lot of work involved.

An accountant can help with the purchase or sale of a business to help ensure the correct steps are followed. This can include:

  • identifying a buyer or vendor
  • advising on tax obligations
  • negotiating a fair price and fair terms
  • following due diligence procedures

Do I need an accountant if I am self-employed?

If you are self-employed, you are your own boss – and that can come with a lot of responsibility, including managing your business finances.

You may consider hiring an accountant to help organise your finances, file your tax return, or keep your books up to date.

Do I need an accountant for a limited company?

If you want to dedicate the majority of your time to the everyday management of your business, you may want someone else to look after its finances. This is when an accountant can help.

However, it is also possible to do the accounts for a limited company yourself. Some business bank accounts may offer accounting software integration. This may be useful if you plan to do your own accounting. Transactions are automatically imported into the software for you to track and organise.

Can I do my own accounts as a sole trader?

There is no rule saying you must have an accountant for your small business. Sole traders can do their own accounting.

You may find that accounting software offers enough features for you to manage your accounts on your own – for example, if you’re just starting out or if you’re running a small business with little turnover or plans for growth.

However, sole traders may consider hiring an accountant in some circumstances. For instance, if you want help filing your tax return or hiring staff for the first time, you may consider enlisting the services of an accountant.

» MORE: What is the cost of hiring someone in the UK?

Can I use accounting software to manage my business finances?

Accounting software can be a helpful tool for small business owners who want to manage their finances digitally.

You can use accounting software on its own or in combination with the services of an accountancy professional. You can give your accountant access to your business’s financial information through accounting software platforms.

What’s more, business bank accounts may offer accounting software integration. This means that you can export your transactions directly from your bank account to your chosen platform, giving you accurate, up-to-date data to work from when managing your finances, whether you’re creating a small business budget or filing your self-assessment tax return.

Where can I find a reputable accountant?

As well as asking business contacts, colleagues and friends for recommendations, you could use the’ find an accountant tool at accountancy trade bodies, such as the Institute of Financial Accountants, the Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland and Chartered Accountants Ireland. Trade body membership can help ensure the person you choose is reputable and qualified to manage your business finances.
You can also check whether an accountancy firm is registered with the Financial Conduct Authority (FCA) by searching the Financial Services register online. It’s worth noting that not all firms that carry out regulated activities need to be registered with the FCA, and this includes professional accountancy firms.

Image source: Getty Images

About the author:

Kristina is a writer at NerdWallet. A recent graduate trading French for finance, she has experience creating content for student newspaper Cherwell and an edtech company. Read more

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